Interim Results

Paragon Group Of Companies PLC
25 May 2005


Under embargo until Stock Exchange announcement: 7am, Wednesday 25 May 2005

                        STRONG PROFIT GROWTH FOR PARAGON

The Paragon Group of Companies PLC ('Paragon'), one of the UK's largest
independent specialist lenders offering buy-to-let mortgages, secured personal
loans, vehicle finance and retail finance, today announces its interim results
for the six months ended 31 March 2005.

Highlights include:

   •Profit before tax increased by 9.1% to £36.1 million (2004 H1: £33.1
    million)

   •Operating profit (excluding goodwill)* increased by 11.5% to £33.9
    million (2004 H1 : £30.4 million)

   •Earnings per share increased by 11.2% to 24.9p (2004 H1: 22.4p)

   •Interim dividend increased by 33.3% to 5.2p (2004 H1 : 3.9p)

   •Buy-to-let assets increased by 24.8% to £4,398.6 million (2004 H1:
    £3,524.6 million)

   •Share repurchase programme of up to £20 million announced

* See note 7
Commenting on the results, Jonathan Perry, Chairman of Paragon, said:

'We are pleased to report strong growth in earnings for a half year where
markets have been disrupted by the introduction of mortgage and insurance
regulation and when housing market activity has been soft. Our buy-to-let assets
have shown a significant increase with lower volumes offset by lower
redemptions.

Buy-to-let application flows have recovered well since February, a trend which
has continued into the second half of the year, leading to strong growth in the
pipeline of business awaiting completion. This bodes well for buy-to-let volumes
in the second half of the year.

The strength of the company's financial resources and the continued growth in
profits have justified both an acceleration in the rate of dividend increase and
the announcement of a share buy back programme to optimise the use of the
company's capital.'

For further information, please contact:

The Paragon Group of Companies PLC          The Wriglesworth Consultancy
Nigel Terrington, Chief Executive           Mark Baker
Nick Keen, Finance Director                 John Wriglesworth
Tel: [phone]                          Tel: [phone]
                                            Mobile: [phone] (MB)
______________________________________________________________________________

THE PARAGON GROUP OF COMPANIES PLC
CHAIRMAN'S STATEMENT

During the six months ended 31 March 2005, the Group enjoyed further strong
profit growth, driven by continued growth in the loan portfolio, despite slower
new lending activity in the period compared with the first half of 2004.

During the period, profit before tax increased by 9.1% to £36.1 million (2004
H1: £33.1 million) and earnings per share increased by 11.2% to 24.9p (2004 H1:
22.4p). Excluding the credit to the profit and loss account for goodwill,
operating profit increased by 11.5% to £33.9 million (2004 H1: £30.4 million)
(note 7).

At 31 March 2005, net loan assets were £6,087.0 million (note 8), compared with
£5,600.4 million at 31 March 2004. This reflected loan redemptions significantly
below the level of new advances, with strong growth in the buy-to-let portfolios
more than compensating for the run-off of the owner-occupied first mortgage and
unsecured consumer books. Total advances, at £817.9 million, were 20.2% lower
than in the previous period (2004 H1: £1,025.4 million). Of these, 93.3% were
secured on residential property (2004 H1: 92.0%).

The Board has declared an interim dividend of 5.2p per share, payable on 29 July
2005 to shareholders on the register on 1 July 2005, an increase of 33.3% from
last year's interim dividend of 3.9p per share, thus accelerating our progress
towards the achievement of a market level of dividend cover.

Net interest income increased by 11.7% to £46.0 million from £41.2 million for
the corresponding period last year, reflecting the growth in the loan book, and
also the lower cost of sales, principally commissions paid to business
introducers. This compensated for the decrease in other operating income to
£17.0 million (2004 H1: £18.8 million), similarly reflecting the impact of
reduced activity on fees and commissions earned. The average net interest margin
on the loan book was similar to 2004.

Operating expenses, excluding the £2.2 million credit for amortisation of
negative goodwill, were £20.6 million, a reduction of 9.3% from £22.7 million
for the corresponding period in 2004. The cost:income ratio, at 32.7%, decreased
from 37.8% for the first half of 2004 (note 4) following completion of the
integration of Mortgage Trust within the Group's operational structure last year
and general improvements in operating efficiencies around the Group.

The Group has continued to implement its strategy of reducing exposure to
unsecured consumer lending, focusing on growing its secured lending, principally
of high quality buy-to-let assets. The number of accounts in arrears across the
portfolios was lower as at 31 March 2005 than a year previously, both
numerically and as a percentage of live accounts. The mortgage books performed
well over the period and the performance of the buy-to-let book remains
exemplary. However, as reported in our recent trading statement, the burden of
increased interest rates, together with the normal seasonal expenditures, caused
some deterioration in payment performance in the consumer portfolios, resulting
in an increase in the charge for provisions for losses to £8.5 million for the
period (2004 H1: £6.9 million).

After providing for corporation tax at a charge rate of 21%, which we anticipate
will apply for the year, and providing for the proposed interim dividend,
retained profits of £22.5 million have been transferred to shareholders' funds
which were £291.3 million at 31 March 2005 (2004 H1: £246.1 million).

REVIEW OF OPERATIONS

FIRST MORTGAGES

Our strategy has been to grow the high quality buy-to-let first mortgage assets
whilst running off the owner-occupied loans, the majority of which were
originated by Mortgage Trust prior to acquisition. Total first mortgage
completions were £637.2 million for the six months to 31 March 2005, compared
with £797.7 million advanced in the corresponding period of 2004. At 31 March
2005, the Paragon Mortgages and Mortgage Trust buy-to-let portfolios had
increased by 24.8% to £4,398.6 million from £3,524.6 million at 31 March 2004
whilst total first mortgage assets, including the owner-occupied loans, were
£5,178.2 million, an increase of 11.1% from £4,662.1 million at 31 March 2004.
The owner-occupied portfolio declined, as expected, by 31.5% between 31 March
2004 and 31 March 2005 from £1,137.5 million to £779.6 million.

The Paragon Mortgages loan book increased by 27.4% to £2,908.5 million at
31 March 2005 (2004 H1: £2,283.3 million), while Mortgage Trust had loans under
management of £2,142.3 million (2004 H1: £2,223.5 million) of which buy-to-let
loans totalled £1,519.9 million (2004 H1: £1,287.1 million), an increase of
18.1%. New lending by Paragon Mortgages was £464.8 million (2004 H1: £522.4
million) whilst Mortgage Trust advanced new loans of £172.4 million (2004 H1:
£275.3 million).

Housing market activity has slowed since the summer of 2004 following a very
busy period for the market in the wake of the war in Iraq and as a consequence
of increased interest rates. The rate of house price growth has also slowed in
recent months, with the evidence so far this year suggesting that the market is
heading for a soft landing.

Uncertainty elsewhere in the housing market has, however, had positive effects
on the buy-to-let market. Market data, and our own survey evidence, indicate
that tenant demand has been on the increase in most regions and for most types
of property. This has created upward pressure on rents which in turn has
resulted in an increase in yields for landlords. At the same time there is less
competition for property as it comes onto the market which has meant that
landlords have been able to secure good deals on new acquisitions, thus again
impacting positively on yields.

Survey evidence continues to suggest that landlords are taking a long term view
of their investments, rather than seeking to crystallise speculative gains. In
our own buy-to-let portfolio, we have seen little evidence of landlords selling
properties, indeed, compared to the previous year, redemption rates have fallen.

Application levels across our buy-to-let businesses were weaker towards the end
of 2004 and during the early part of 2005, partly the result of general housing
market uncertainties and partly due to the disruptive impact of the introduction
of mortgage regulation. Since then, trading activity has been strong both at
Paragon Mortgages and at Mortgage Trust, with the result that the new business
pipelines have rebuilt strongly since February. This bodes well for lending
volumes in the second half of the year.

Looking further ahead, the prospects for the buy-to-let market remain strong and
demand for private rented property is expected to increase, the eligibility of
residential property for Self-Invested Personal Pensions ('SIPPs') from 2006 may
also have a positive effect on demand. In anticipation, we have recently
announced a joint venture with James Hay, the UK's leading provider of SIPPs to
provide, jointly, a range of products to support buy-to-let investors who wish
to place residential property investments into their SIPP.

The credit profile of our buy-to-let portfolio remains exceptionally high,
evidenced by the continuing low arrears rate compared to the mortgage market as
a whole and negligible losses.

CONSUMER FINANCE

The consumer finance market has been more challenging in the six months to
31 March 2005 than in the corresponding period last year. Rising interest rates
and a weaker housing market have resulted in an adjustment to borrower
behaviour, with a consequential reduction in consumer finance business volumes.
The Group has maintained its tight credit stance in the face of strong
competitive pressure. This resulted in a 3.1% reduction in the Consumer Finance
book which, at 31 March 2005, stood at £908.8 million, compared with £938.3
million at 31 March 2004.

Personal Finance

Revisions to the Consumer Credit Act and the introduction of regulation over
insurance business have had an adverse effect on volumes as introducers have
struggled to adapt systems and working practices to ensure compliance. These
disruptive effects appear now to be receding, although higher interest rates
have had an impact on the appetite of consumers for further borrowing. This is
unlikely to change over the remainder of the year. We continue to be cautious in
our lending approach and have tightened criteria in anticipation of the changing
economic environment. Accordingly secured personal finance advances were £125.4
million in the period (2004 H1: £146.0 million). These advances were secured on
UK residential property.

We continue to manage the run-off of the unsecured personal loan portfolio. Net
balances were £190.7 million at 31 March 2005 compared to £226.8 million at
31 March 2004. The impact of interest rates and pressures on personal cashflow
over the Christmas period led to a deterioration in payment performance for some
customers in arrears, although we saw a recovery during March and April as
borrowers caught up on their missed payments.

Sales Aid Finance

In line with our strategy outlined in the year end results, we have continued to
focus upon profitability in the car and retail finance sectors as opposed to
volume. New loan advances by the division were £55.2 million, compared with
£81.7 million for the corresponding period last year.

The profitability of both businesses within Sales Aid Finance has improved
during the half year along with the profile and quality of the business received
due to the removal of unprofitable relationships and the tightening of credit
standards. The principal focus of the division going forward is the generation
of new sources of profitable business.

FUNDING

The Group continued to be an active issuer in the capital markets during the
period. During October 2004, the Group completed a £1.0 billion securitisation
by Paragon Mortgages (No. 8) PLC, the largest Paragon transaction to date. The
securitisation contained a £270 million cash reserve which was used to fund
additional buy-to-let assets in March 2004.

In December 2004 a £300 million securitisation of secured consumer loans was
completed by Paragon Secured Funding (No. 1) PLC. The securitisation contained a
£59 million cash reserve which was used to fund additional second mortgage
assets in April 2005. In May 2005, a £450 million securitisation of secured and
unsecured consumer loans was completed by Paragon Personal and Auto Finance (No.
3) PLC.

In April 2005 the Group issued £120 million 7% callable subordinated notes due
2017. This inaugural transaction provides long term capital at attractive
pricing and improves the flexibility available to the Group in its capital
management.

CAPITAL MANAGEMENT

The Board regularly reviews the appropriate level of capital to support its
current loan portfolios and to ensure that its business plans can be met. In
this respect, the Board has regard to a number of factors, including the capital
needed to support planned business generation over the medium term, the risk
characteristics of the portfolio and the capital being returned to the Group as
loans on the book mature.

As a result of a similar review in 2002, the Board decided to increase dividends
progressively ahead of earnings growth in order to reduce dividend cover over
the medium term. Since that time, dividends have increased annually at roughly
double the rate of earnings growth.

Whilst our new business generation targets remain stretching, the Group's
portfolio continues to generate capital. We have also reduced the portfolio's
risk profile by our disciplined restructuring of the portfolio from unsecured
towards secured lending, which is less demanding on the Group's capital.
Consumer loans, as a proportion of the portfolio, have been reducing year on
year from 36% in 2002 to 15% as at 31 March 2005. Within this the unsecured
personal loan book has been declining in absolute terms since the product was
withdrawn and as loans have redeemed, from £319.9 million at 30 September 2002
to £190.7 million at 31 March 2005, 3% of the total loan book.

Considering all these factors, the Board has identified that there is surplus
capital available for distribution to shareholders and has decided that, in
addition to increasing the interim dividend by 33.3%, thus accelerating the
Group's progress towards the objective of achieving a market level of dividend
cover within two years, the Company should also set aside up to £20 million to
repurchase shares from the market. This will be completed within the authority
granted to the Company by shareholders at the 2005 Annual General Meeting.

The Board will continue to keep under review the appropriate capitalisation of
the business.

CONCLUSION

The outlook for landlords remains positive with increased rental demand
translating into higher rents and improving yields. Survey evidence and our own
experience suggests landlords are continuing to take a long term view of their
property investments. Whilst trading volumes were subdued throughout the winter
months, redemption rates have fallen leading to continued strong growth in the
portfolio. Further, application flows have recovered well since February, a
trend which has continued into the second half year leading to strong growth in
the pipeline of business awaiting completion. This bodes well for completion
volumes in the second half of the year.

The Board remains confident that the Group will meet its business objectives for
the year.

Jonathan Perry
Chairman
25 May 2005
______________________________________________________________________________

THE PARAGON GROUP OF COMPANIES PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the six months ended 31 March 2005 (Unaudited)

                                  Six months to  Six months to        Year to
                                       31 March       31 March   30 September
                                           2005           2004           2004
                                             £m             £m             £m

Interest receivable                       240.9          192.7          412.0
Interest payable and similar
charges                                  (194.9)        (151.5)        (331.4)
                                       _________      _________      _________
Net interest income                        46.0           41.2           80.6
Other operating income                     17.0           18.8           40.2
                                       _________      _________      _________
Total operating income                     63.0           60.0          120.8

Operating expenses
    Other operating expenses              (20.6)         (22.7)         (43.9)
    Amortisation of negative
    goodwill                                2.2            2.7            5.2
                                       _________      _________      _________
Total operating expenses                  (18.4)         (20.0)         (38.7)

Provisions for losses                      (8.5)          (6.9)         (11.1)
                                       _________      _________      _________
Operating profit being profit on
ordinary activities before
taxation                                   36.1           33.1           71.0
Tax charge on profit on ordinary
activities                                 (7.6)          (7.6)         (16.3)
                                       _________      _________      _________
Profit on ordinary activities
after taxation                             28.5           25.5           54.7
Equity dividend                            (6.0)          (4.5)         (11.0)
                                       _________      _________      _________
Retained profit                            22.5           21.0           43.7
                                       =========      =========      =========

Dividend - Rate per share                   5.2p           3.9p           9.6p
Basic earnings per share                   24.9p          22.4p          48.0p
Diluted earnings per share                 23.9p          21.6p          46.2p
                                       =========      =========      =========

There have been no recognised gains or losses other than the profit for the
periods shown.

The results for the periods shown above relate entirely to continuing
operations.
______________________________________________________________________________

THE PARAGON GROUP OF COMPANIES PLC
CONSOLIDATED BALANCE SHEET
31 March 2005 (Unaudited)

                                           31 March    31 March   30 September
                                               2005        2004           2004
ASSETS EMPLOYED                                  £m          £m             £m
Fixed assets
Intangible assets - negative goodwill         (11.8)      (16.1)         (14.0)
Tangible assets                                 3.7         3.6            3.4
Investments
    Assets subject to non-recourse
    finance                                 1,341.2     1,797.5        1,557.7
    Non-recourse finance                   (1,297.8)   (1,751.6)      (1,520.3)
                                           _________   _________      _________
                                               43.4        45.9           37.4
    Loans to customers                      4,842.5     3,909.2        4,492.5
                                           _________   _________      _________
                                            4,885.9     3,955.1        4,529.9
                                           _________   _________      _________
                                            4,877.8     3,942.6        4,519.3
                                           _________   _________      _________
Current assets
Stocks                                          3.2         3.4            3.4
Debtors falling due within one year             7.5        10.6            8.8
Cash at bank and investments                  452.5       345.9          402.5
                                           _________   _________      _________
                                              463.2       359.9          414.7
                                           _________   _________      _________
                                            5,341.0     4,302.5        4,934.0
                                           =========   =========      =========
FINANCED BY
Called-up share capital                        12.0        12.0           12.0
Share premium account                          69.5        68.6           68.8
Merger reserve                                (70.2)      (70.2)         (70.2)
Profit and loss account                       293.8       247.2          270.1
                                           _________   _________      _________
Share capital and reserves                    305.1       257.6          280.7
Own shares                                    (13.8)      (11.5)         (12.3)
                                           _________   _________      _________
Equity shareholders' funds                    291.3       246.1          268.4

Provisions for liabilities and charges          4.5         5.3            5.6
Creditors
    Amounts falling due within one year        77.8        45.9           66.4
    Amounts falling due after more than
    one year                                4,967.4     4,005.2        4,593.6
                                           _________   _________      _________
                                            5,341.0     4,302.5        4,934.0
                                           =========   =========      =========

The interim financial information was approved by the Board of Directors on
25 May 2005.
______________________________________________________________________________

THE PARAGON GROUP OF COMPANIES PLC
CONSOLIDATED CASH FLOW STATEMENT
For the six months to 31 March 2005 (Unaudited)

                                   Six months to  Six months to        Year to
                                        31 March       31 March   30 September
                                            2005           2004           2004
                                              £m             £m             £m
Net cash inflow from operating
activities                                  66.6           55.0          129.3
Taxation                                    (1.6)         (10.6)         (14.6)
Capital expenditure and financial
investment
    Net decrease in assets subject to
    non-recourse funding                   216.5          562.6          800.2
    Net increase in loans to
    customers                             (377.3)        (881.9)      (1,485.2)
    Other                                   (0.7)          (1.8)          (0.8)
Acquisitions and disposals                   2.0              -              -
Equity dividends paid                       (6.5)          (4.2)          (8.6)
Management of liquid resources             (48.8)         (37.5)         (85.7)
Financing                                  151.5          331.5          686.5
                                        _________      _________      _________
Increase in cash in the period               1.7           13.1           21.1
                                        =========      =========      =========

1.      Reconciliation of operating profit to net cash inflow from operating
        activities

                                  Six months to  Six months to        Year to
                                       31 March       31 March   30 September
                                           2005           2004           2004
                                             £m             £m             £m

Operating profit                           36.1           33.1           71.0
Provision for losses                        8.5            6.9           11.1
Depreciation                                0.4            0.7            1.6
Amortisation of broker commissions         17.9           19.1           37.2
Amortisation of negative goodwill          (2.2)          (2.7)          (5.2)
Charge for long term incentive
plan                                        0.6            0.7            0.9
(Increase) / decrease in stock             (0.1)           0.2              -
Profit on sale of subsidiary               (0.9)             -              -
Decrease / (increase) in debtors            1.2           (1.2)           0.7
Increase / (decrease) in creditors          5.1           (1.8)          12.0
                                       _________      _________      _________
                                           66.6           55.0          129.3
                                       =========      =========      =========

2.      Reconciliation of movement in cash with movement in net debt

                                  Six months to   Six months to        Year to
                                       31 March        31 March   30 September
                                           2005            2004           2004
                                             £m              £m             £m

Increase in cash in the period              1.7            13.1           21.1
Cash inflow from increase in debt        (151.7)         (330.7)        (687.2)
Cash movement from change in
liquid resources                           48.8            37.5           85.7
                                       _________       _________      _________
Movement in net debt                     (101.2)         (280.1)        (580.4)
Opening net debt                       (5,710.6)       (5,130.2)      (5,130.2)
                                       _________       _________      _________
Closing net debt                       (5,811.8)       (5,410.3)      (5,710.6)
                                       =========       =========      =========
______________________________________________________________________________

THE PARAGON GROUP OF COMPANIES PLC
NOTES TO THE INTERIM FINANCIAL INFORMATION
For the six months ended 31 March 2005 (Unaudited)

1.    The interim financial information for the six months ended 31 March 2005
      and for the six months ended 31 March 2004 has not been audited.

2.    The interim financial information has been prepared on the basis of the
      accounting policies set out in the group accounts for the year ended 30
      September 2004.

3.    An interim dividend of 5.2p per share is proposed, payable on 29 July
      2005 with a record date of 1 July 2005.

4.    The cost:income ratio for the six months ended 31 March 2005 is
      calculated by dividing operating expenses, excluding the amortisation of
      negative goodwill (£2.2m - 2004: £2.7m), of £20.6m (2004: £22.7m) by 
      total operating income of £63.0m (2004: £60.0m) to give 32.7% 
      (2004: 37.8%).

5.    The basic earnings per share figures have been calculated by dividing
      the profit attributable to shareholders (being the profit on ordinary 
      activities after taxation) by the weighted average number of ordinary 
      shares outstanding during the period. For the six months ended 31 March 
      2005 the weighted average number of ordinary shares outstanding was 
      114.2 million (2004: 113.9 million). For the year ended 30 September 
      2004 the weighted average was 113.9 million.

6.    The diluted earnings per share figures have been calculated by adjusting
      the weighted average number of shares outstanding for the effects of all
      dilutive potential ordinary shares. For the six months ended 31 March 
      2005 the adjusted weighted average number of ordinary shares outstanding 
      was 119.0 million (2004: 118.3 million). For the year ended 30 
      September 2004 the adjusted weighted average was 118.3 million.

7.    The operating profit for the period excluding goodwill comprises the
      operating profit of £36.1m (2004: £33.1m) less the credit for the
      amortisation of negative goodwill of £2.2m (2004: £2.7m).

8.    Net loan assets includes Loans to Customers shown on the face of the
      balance sheet of £4,842.5m (2004: £3,909.2m) and similar assets subject 
      to non-recourse finance arrangements of £1,244.5m (2004: £1,691.2m).

9.    The figures shown above for the year ended 30 September 2004 are not
      statutory accounts. A copy of the statutory accounts has been delivered 
      to the Registrar of Companies, contained an unqualified audit report and
      did not contain an adverse statement under sections 237 (2) or 237 (3) 
      of the Companies Act 1985.

10.   A copy of the Interim Statement will be posted to shareholders and
      additional copies can be obtained from The Company Secretary, The 
      Paragon Group of Companies PLC, St. Catherine's Court, Herbert Road, 
      Solihull, West Midlands, B91 3QE.
______________________________________________________________________________

INDEPENDENT REVIEW REPORT
TO THE PARAGON GROUP OF COMPANIES PLC

Introduction

We have been instructed by the company to review the financial information for
the six months ended 31 March 2005 which comprises the profit and loss account,
the balance sheet, the cash flow statement and related notes 1 to 10 together
with the reconciliation of operating profit to net cash flow from operating
activities and the reconciliation of movement in cash with movement in net debt.
We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.

This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters which we are required to state to them
in an independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company for our review work, for this report or for the conclusions we have
formed.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2005.

Deloitte & Touche LLP
Chartered Accountants
Birmingham
25 May 2005


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